Judge's narrow reading of contractor DEI order ends one lawsuit as the White House says "DEI is dead"

A federal judge in Maryland has read President Donald Trump's executive order on contractor diversity programs as a ban on intentional race discrimination and nothing broader. Two weeks later, the groups that sued over the order dropped their case. On the same day, the White House put out a fact sheet declaring "DEI is dead." The two sides now read the same ruling in different ways, and a separate suit by 20 state attorneys general is still pending.

The order is Executive Order 14398, "Addressing DEI Discrimination by Federal Contractors." Trump signed it on March 26, 2026. It tells agencies to put a clause in federal contracts and subcontracts. In the clause, a contractor agrees that it "will not engage in any racially discriminatory DEI activities." The order defines that phrase as "disparate treatment based on race or ethnicity in the recruitment, employment (e.g., hiring, promotions), contracting (e.g., vendor agreements), program participation, or allocation or deployment of an entity's resources."

What the order requires

The order does more than add a sentence to a contract. It also asks contractors to acknowledge that compliance is "material to the Government's payment decisions." That wording matters because the False Claims Act lets the government pursue companies that knowingly submit false claims for payment, and a materiality finding is part of such a case. The order directs the Attorney General to consider False Claims Act actions against violators. It also allows contract cancellation, termination, and exclusion from future federal work.

The Federal Acquisition Regulatory Council turned the order into a model clause, FAR 52.222-90, in an April 17 memo. Agencies were told to add it to new solicitations and to modify existing contracts by July 24, 2026. The government agreed to hold off on False Claims Act enforcement tied to the order until Aug. 7, according to the court record as summarized by the law firm Ogletree Deakins.

The scale is large. In a lawsuit announcement, Maryland Attorney General Anthony Brown's office said the federal government estimates the order could affect as many as 640,000 contracts and subcontracts. That includes more than 160,000 contracts with over 34,000 unique vendors.

1. Mar. 26, 2026Trump signs Executive Order 14398
2. Apr. 17, 2026FAR Council memo creates model clause FAR 52.222-90
3. Apr. 20, 2026Five associations sue in federal court in Maryland
4. Jun. 10, 202620 attorneys general file a separate suit
5. Jul. 24, 2026Deadline to modify existing contracts
6. Oct. 14, 2026Judge Adam Abelson denies a preliminary injunction
7. Oct. 28, 2026Plaintiffs file notice of voluntary dismissal

Source: Ogletree Deakins

Who sued and what they argued

Five groups filed the main challenge on April 20. They are the National Association of Diversity Officers in Higher Education (NADOHE), the American Association of University Professors, United Academics of Maryland at the University of Maryland, College Park, the National Association of Minority Contractors, and that group's Washington, Maryland and Virginia chapter. Democracy Forward represented them.

They argued that the order is overbroad and aimed at speech based on its content. They said it forces contractors to give up protected expression to keep federal work. They also argued the clause is unconstitutionally vague, and that the FAR memo breaks the Administrative Procedure Act. They asked Judge Adam B. Abelson of the U.S. District Court for the District of Maryland for a preliminary injunction against the order and a stay of the memo.

What Judge Abelson decided on Oct. 14

Abelson denied both requests. His reasoning rested on the definition in the order. He wrote that "disparate treatment" is a legal term of art. In civil rights law it means intentional discrimination. On that reading, the order "only prohibits contractors from engaging in conduct that is already prohibited by federal law."

The judge did not endorse the phrase "racially discriminatory DEI activities" by itself. He said that phrase "is far from self-explanatory" and that, if it stood alone, a ban "may very well have run afoul of the First Amendment." The definition in the order is what saved it, in his view.

He leaned on the Fourth Circuit's earlier ruling in the first NADOHE case, which upheld a 2025 requirement that contractors certify compliance with federal antidiscrimination law. That court said the First Amendment does not confer a right to violate those laws. Abelson applied the same logic. If the order bars only conduct that federal law already bars, the plaintiffs have no protected speech interest in doing it.

He also ruled on the vagueness claim. The clause starts with the words "in connection with the performance of work under this contract." The judge read that as limiting the clause to work done under the contract that contains it. Enforcement against a contractor's conduct or speech outside the contract, he wrote, "may well be unconstitutional retaliation."

Activities the court said fall outside the order

The opinion went through the examples the plaintiffs feared. According to summaries from the law firms Arnold & Porter and Ogletree Deakins, the judge said the order does not reach:

• Recruitment designed to make sure qualified non-white applicants have a chance to apply.
• Anti-racism trainings.
• Research on diseases with "disparate negative health outcomes for particular races."
• Teaching, researching or publishing on diversity topics.

These activities do not, "without something more," treat anyone less favorably because of race or ethnicity, the court said. The government's lawyers conceded part of this. Per Arnold & Porter, they said studies of diseases that affect one race more than another are not instances of discrimination, and that discussing racial disparities, including historical ones, "would not be disparate treatment based on race or ethnicity."

The court also said that a False Claims Act case aimed at lawful programs would go beyond the order and could violate the First Amendment. A contractor facing such a case could bring an as-applied challenge, the judge noted.

What the court did not decide

The ruling was not a final judgment. Abelson denied preliminary relief and did not decide any contractor's liability. As the law firm Morgan Lewis put it in its client alert, the contract obligations "remain in place." That covers the new contract terms, access to compliance records, reports about subcontractors, and the acknowledgment about payment decisions. The court left some Administrative Procedure Act questions open. Those include whether the FAR memo is a final agency action and whether the council explained its choices well enough.

Plaintiffs drop the case

On Oct. 28, Bloomberg Government reported, the plaintiffs filed a notice of voluntary dismissal. The outlet said they were ending the lawsuit after the judge read the order narrowly to ban only conduct that is already illegal. This account is based on the part of the report that was available without a subscription. We did not see the plaintiffs' own explanation for the dismissal.

Democracy Forward's statement on the Oct. 14 ruling shows how the plaintiffs framed the result. The group said the order "means nothing more than 'follow the well-settled law.'" It said the ruling gives "much-needed reassurance" to contractors who "should not have to fear that their lawful efforts to support diversity, equity, and inclusion will put them at risk of political prosecution."

How the administration describes the order

The White House sees the order as one piece of a larger effort. Its Oct. 28 fact sheet says that in 21 months back in office Trump "has removed wasteful and unmeritocratic DEI programs from government, education, and the private sector." The fact sheet lists the March 2026 order among many actions and says "DEI is dead." It also lists the Deloitte and Accenture settlements.

The Justice Department speaks about contractors in terms of existing law. Attorney General Todd Blanche said in August that "government contractors cannot reward or penalize employees based on race or sex — and labeling the practice DEI does not make it lawful." Civil Division head Brett Shumate said that when a contractor "misrepresents its compliance with federal anti discrimination law to secure federal funds, it violates the conditions for receiving those funds and risks liability under the False Claims Act."

Both the court and the department describe the target as conduct that federal law already prohibits. The open question is which practices fall inside that description. The department says the practices in its settlements were discrimination. Accenture denied the allegations against it, and each settlement was reached without a finding of liability.

The three False Claims Act settlements

The Justice Department's Civil Rights Fraud Initiative, launched in May 2025, has produced three public settlements with large federal contractors. Each release says the claims are allegations only and that there has been no determination of liability.

$0M

$10M

$20M

$30M

IBM$17.1M

Deloitte$21.5M

Accenture$25M

IBMDeloitteAccenture

Source: DOJ: IBM, DOJ: Deloitte, DOJ: Accenture

Show the numbers

Company	Settlement
IBM	$17.1M
Deloitte	$21.5M
Accenture	$25M

IBM paid $17,077,043 on April 10. The government alleged the company tied bonuses to a diversity modifier, used "diverse interview slates," and limited some training and mentoring programs by race or sex. The release says IBM received credit for cooperating and for ending some of the practices.

Deloitte agreed on Aug. 25 to pay $21.5 million. The government alleged that Deloitte set non-public race and sex goals, tracked them in color-coded monthly summaries, and limited programs called Springboard and Compass by race and sex. The case began as a whistleblower suit by the American Alliance for Equal Rights, which receives $4.3 million under the deal.

Accenture agreed on Sept. 14 to pay $25 million. The government alleged that Accenture Federal Services tracked demographic goals in green, yellow and red and ran a training program, Amplify to Elevate, reserved by race. According to the legal blog The D&O Diary, Accenture denied the allegations and $11.6 million of the payment was characterized as restitution.

These settlements did not rest on Executive Order 14398. The releases describe the claims as false certifications of anti-discrimination terms already in federal contracts, and the Accenture and Deloitte periods run from 2017. The D&O Diary observed that practices "widely promoted and considered standard under prior administrations" have become enforcement risks as priorities shifted. The Justice Department's position is that the certifications in the contracts were false when made.

The D&O Diary also reported a state action: on Sept. 17, Florida Attorney General James Uthmeier announced a settlement with Starbucks over what he described as race- and sex-based quotas. Under it, Starbucks agreed to stop using such hiring and promotion goals, certify compliance annually for four years, and pay $1 million to reimburse the state. Starbucks denied wrongdoing.

What is still open

The narrow reading leaves several things unsettled. Contractors still have the clause in their contracts and still carry the acknowledgment about payment decisions. Morgan Lewis wrote that the narrower reading "does not eliminate investigations, contract remedies, challenges to eligibility for federal work, or FCA cases." Ogletree noted that the ruling lets the government keep inserting the clause in new and existing contracts.

Maryland v. Hegseth, brought on June 10 by a coalition of 20 attorneys general, was still pending in Maryland federal court as of Ogletree's Oct. 19 report. That suit says agencies added the new contract terms without public notice or comment and that the terms are unclear. Brown said the terms were "imposed without public input, without clear guidance, and without explanation of how they differ from anti-discrimination laws that have been on the books for decades." We have not confirmed its current status beyond that report.

Other courts are working on the same line between lawful inclusion and unlawful preference. A federal judge in Chicago recently ruled that conditions on police hiring grants were unlawful; see our report on the Chicago, Saint Paul and Santa Monica grant ruling. The Education Department's new rule for college accreditors reaches into the same debate; our accreditation rule report covers it. In admissions, a judge dismissed the Justice Department's bid for Harvard's applicant data, which we covered in the Harvard Title VI case. The Supreme Court is also hearing a Title VII case about when an employer can defend race-conscious decisions, covered in our report on the Younge argument.

For contractors, the practical question is where the line sits in daily decisions. Morgan Lewis advised that the focus should be "on the intent and implementation of their programs, not whether they use the term DEI." Its alert told contractors to check who can join employee groups and who is eligible for mentoring and training, and to keep records of how decisions are made. "Renaming a program does not fix discrimination," the firm wrote, "and a lawful program does not necessarily need a new name." Whether a court would draw the line in the same place in a case that a contractor chooses to fight has not been tested.

Differing perspectives

How should the federal contractor DEI order be read and enforced?

Each position is summarized as its supporters make it, with equal weight and in alphabetical order. A summary is not an endorsement; the evidence for each is weighed in the story above.

• Enforce it, including through the False Claims Act

  Who holds it: The Justice Department, the Attorney General and the White House

  Department officials say federal contractors certify that they will make employment decisions without regard to race or sex, and that using demographic goals, race-limited programs or race-based staffing breaks that promise. They say labeling the practice DEI does not make it lawful. They point to settlements with IBM, Deloitte and Accenture as evidence that the department will pursue contractors that take taxpayer funds while allegedly discriminating, and they describe the claims as based on the certifications in the contracts themselves.

  In their words: U.S. Department of Justice, Office of Public Affairs ↗

• Set aside the contract terms for lack of notice and clarity

  Who holds it: A coalition of 20 state attorneys general led by Maryland's Anthony Brown

  The attorneys general argue that agencies added the new terms without public notice or comment, as procurement law requires, and without explaining how the terms differ from antidiscrimination laws that have applied for decades. They say contractors, including state agencies and universities, lack clear guidance and face severe penalties, including contract cancellation, exclusion and False Claims Act suits. They ask the court to hold the actions unlawful and block the terms.

  In their words: Office of the Maryland Attorney General ↗

• Treat it as a ban on intentional discrimination only

  Who holds it: The plaintiff coalition of NADOHE, AAUP, United Academics of Maryland and minority contractor associations, and Democracy Forward

  The plaintiffs say the court confirmed that the order means no more than following well-settled law, reaches only intentional discrimination, and applies only to work done under the specific contract. They point to the court's statement that DEI activity can fall comfortably within the law, and say research, teaching and publishing about diversity are not prohibited. They argue contractors should not have to fear political prosecution for lawful inclusion efforts.

  In their words: Democracy Forward ↗